Rapid advances made in biological research aimed at understanding the molecular basis of the pathogenesis of Alzheimer's disease have led to the characterization of a novel catalytic activity termed gamma-secretase. First described for its P-amyloid-producing function, gamma-secretase is now actively studied for its role in a novel signal transduction paradigm, which implicates cell-surface receptor proteolysis and direct surf ace-to-nucleus signal transduction. gamma-Secretase targets numerous type I protein receptors involved in diverse functions ranging from normal development to neurodegeneration. In this Review we discuss how the study of the genetic and molecular aspects of Alzheimer's disease has revealed a dual role of gamma-secretase in transcriptional regulation and in the pathogenesis of familial Alzheimer's disease.